You're best known as the local guy who took on the multinational outsourcers. What are you doing in SMB?
Peter Kazacos (PK): The large service providers want to get into SMB so I want to try and dominate it before they make a play. I got into outsourcing before most of them; in fact, IBM didn't have outsourcing in Australia at the time. I think it's going to be very hard for the multinationals to break the back of the SMB space. They've tried for years but it's about the model and how they try to execute. It really came to me when I was at Telstra because the process made me realise why they are so slow. You can't speed it up because the whole mechanism doesn't allow you to do that and I'm sure the same is true inside IBM, EDS and CSC.
What are the biggest differences you've seen in how the SMB market works compared to your old stomping ground?
PK: In SMB, the customer makes a decision to buy and wants the item there virtually the same day. The distributors we work with are getting smarter but you still have the classic problem when you want to supply hardware. For example, we had an SMB that ordered a blade storage unit. Now, if you buy a car, you expect the engine to be there before you have to pay anything but it doesn't always work that way with the big IT vendors. We ordered the blade and got the bill, but then when we went to see the customer it still hadn't arrived. Understandably, they don't want to pay anything because the system doesn't work without that key component. Part of that model needs to change.
That's part of trying to ensure that you can react quickly enough and do it profitably. In the blade storage unit example I gave, where there was a partial shipment, people have to get involved and profits are quickly eroded.
Another bone I have to pick with a lot of the multinationals is how hard it is to get back into the system. I was out of the industry for a while so I had to reregister here and there and fill out lots of paperwork, which wasn't a problem, but it's different from operating in the larger space. In the larger space, you can pick up the phone because you have the relationship but in SMB people are more likely to use Google to find out who the partners are in any particular space. Being in the partner pages is vital and yet even six months after registering as a partner we are not listed in a certain field. I think the plot's been lost when it comes to the key goal, which is for a customer to find you and buy something.
I like brand association, because it's surprising how often people don't realise you carry certain ones, but even getting something to put on the wall from some of the big vendors is hard.
You've made a play with a number of tier-one brands but have also said you will try to help local companies find a route to market. What progress are you making there?
PK: It's hard because the quality is usually there but the brand doesn't support it. For example, I've just become chairman of Neller Software, which is a quiet achiever that does the payroll for more than half a million Australians. They've been able to establish a certain size by using reference but they don't market the brand. If you're new then you don't even have those references.
Some of our regional centres have been the best supporters of local software because they're looking for value for money and are willing to give Australian companies a go. We can basically set the price wherever we want but I always tell our local software suppliers not to make it too cheap or customers will think the quality is poor. You can't set a premium price either, because you need to respect that you're competing against international brands, but you only need to go a little below.
We launched a business called Paradigm as a way of creating our own brand in that space that brings another of these products together. Dick Smith Foods is the perfect analogy because he's using his brand to get Australian produce to market. Maybe we should have called it Peter Kazacos Software but that's another story. The big issue, even if the product is good, is that you don't know how long some of these companies will be around for. Paradigm will hopefully create the confidence that these [unknown local software] products will be supported.